German producer-price inflation accelerated to the fastest pace in 26 years in June on surging energy costs.
Producer-price inflation is an early indicator of price pressures in the economy.
Prices for goods from newsprint to plastics increased 6.7 per cent from a year earlier, the most since March 1982, after rising an annual 6 per cent in May, the Federal Statistics Office in Wiesbaden said this morning.
Record oil prices are making production more expensive, putting pressure on companies to pass on higher costs to consumers.
The European Central Bank this month raised its benchmark interest rate by a quarter point to 4.25 per cent to try to prevent faster inflation from becoming entrenched in the 15-nation euro region.
"The ECB follows producer prices all over Europe very closely,'' said Juergen Michels, an economist at Citigroup in London. "It will continue to warn of inflation risks."
Oil prices have risen more than 70 per cent over the past year and reached a record of $147.27 a barrel on July 11th.
Inflation in Germany accelerated to 3.4 per cent in June, the fastest pace in 12 years, and consumer prices in Europe gained an annual 4 per cent, the most since 1992.